Section 218 — IFSC Specified Investment | ITA 2025

Section 218 — - TAX ON IFSC SPECIFIED INVESTMENT INCOME

Section 218 is the substantive equivalent of 1961 s. 115AC -- special rate provision for income of the nature referred to in s. 147(3) (IFSC specified investment income). Where total income includes such income, aggregate income-tax = special-rate-tax on s. 147(3) income + regular tax on balance. Concessional rate typically 10% on bonds / GDR / specified securities issued by Indian co. and held in IFSC. The provision encourages IFSC fund-flow into qualifying Indian instruments.

Statutory text — Income-tax Act, 2025

Marginal note -- Tax on s. 147(3) IFSC specified income

Where the total income of an assessee includes income of the nature referred to in section 147(3), the aggregate of income-tax payable by the assessee shall be the aggregate of income-tax computed on the income specified in column B of the

36. Sections 217 and 218 substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to their substitution, sections 217 and 218 read as under : “217. Benefit under Chapter to be available in certain cases even after assessee becomes resi- dent.—Where a non-resident Indian in any tax year,—

(a) becomes assessable as a resident in India in respect of total income in a subsequent year; and

(b) furnishes a declaration in writing to the Assessing Officer along with his return of income under section 263 for the tax year for which he is so assessable, to the effect that provisions of sections 212 to 218 shall continue to apply to him in relation to the investment income derived from any foreign exchange asset referred to in section 212(e) other than shares in an Indian company, then the provisions of sections 212 to 218 shall continue to apply in relation to such income for that tax year and every subsequent tax year until the transfer or conversion (otherwise than by transfer) of such assets into money.

Chapter not to apply if the assessee so chooses.—A non-resident Indian may choose not to be governed by the provisions of sections 212 to 217 for any tax year by declaring it in his return of income under section 263 for such tax year, and if he does so,—

(a) the provisions of sections 212 to 217 shall not apply to him for that tax year, and

(b) his total income for that tax year shall be computed and charged to tax according to the other provisions of this Act.” Table below at the rate specified in the corresponding entry in column C of the said Table:

TABLE

Sl. No. Income Rate of income-tax payable

A B C

1. Income referred to in section 147(3) 15%

2. Total income as reduced by income referred Rates in force.] to in Sl. No. (1) Conversion of an Indian branch of foreign company into subsidiary Indian company.

ELIGIBLE INCOME (s. 147(3) referenced): bonds / GDR / specified securities issued by Indian companies and held by NR or IFSC unit. RATE: 10% on such income (no deduction allowed). Tax = aggregate of: (a) 10% × s. 147(3) income; + (b) regular tax × balance income. PRACTITIONER: relevant for foreign investors / IFSC funds holding Indian-co bonds / GDRs; combine with s. 147 IFSC unit deduction for synergy. DTAA more-beneficial test under s. 159.

CROSS-REFERENCES

Section 147 -- IFSC unit deduction.
Section 159 -- DTAA framework.
Section 9 -- Source-rule.
Section 209 -- NR general rates.

← All sections (537)Act 2025 hub

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 218	INCOME-TAX ACT, 1961 -- s. 115AC
IFSC-specified investment income special rate	1961 s. 115AC